2012 (3) TMI 672 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal exceeded its jurisdiction by deciding on the non-compete fee of Rs. 15 per share.
2. Whether the Tribunal's decision amounted to an enhancement of tax liability.
3. Whether the Tribunal provided sufficient opportunity of being heard to the assessee.

Summary:

Issue 1: Jurisdiction of the Tribunal
The assessees filed Miscellaneous Applications to recall the Tribunal's order dated 03.02.2011, arguing that the Tribunal decided on an issue (non-compete fee of Rs. 15 per share) which was not a ground before it. The Tribunal clarified that the subject matter of the appeal was the transactions as per the share purchase agreement dated 28-01-06, which included a non-compete fee. The Tribunal held that it was within its jurisdiction to give factual findings on the issue of capital gains or any other income arising from the transactions. The Tribunal cited the case of Indian Management Advisors and Leasing (P) Ltd. vs Commissioner of Income Tax, where it was held that the Tribunal could analyze documents and come to a different conclusion than the AO and CIT(A).

Issue 2: Enhancement of Tax Liability
The Tribunal found that its decision to assess Rs. 15 per share as business income u/s 28(va) did not amount to an impermissible enhancement of tax liability. It stated that the Tribunal is the last fact-finding body and has the jurisdiction to decide on issues arising from the transactions. The Tribunal referenced the case of CIT vs H.P. State Forest Corporation Ltd., where it was held that the Tribunal could not give a direction limiting the income assessment. The Tribunal concluded that the tax liability was a consequential effect and not a mistake apparent from the record.

Issue 3: Opportunity of Being Heard
The Tribunal acknowledged that it did not provide sufficient opportunity of being heard to the assessee regarding the non-compete fee of Rs. 15 per share. The Tribunal noted that the hearing was completed within three days and the assessee was not specifically asked to address the issue of the non-compete fee. Citing the case of Honda Siel Power Products Ltd. and Lachman Dass Bhatia Hingwala (P) Ltd. vs ACIT, the Tribunal emphasized that no party should suffer due to a mistake by the Tribunal. The Tribunal decided to keep in abeyance its observations on the non-compete fee and directed the Registry to fix the case for a fresh hearing on this issue.

Conclusion:
The Miscellaneous Applications were allowed in part, with the Tribunal's observations on the non-compete fee being kept in abeyance pending a fresh hearing. The order was pronounced on 28.03.2012.